Tuesday, November 3, 2009

I'm sure you saw on Friday that the Obama administration announced that the government's fiscal stimulus program has helped to create of save 650,000 jobs so far. Here is an excerpt from an article on UPI.com:

"A federal report compiling data from all 50 states is due Friday, USA Today reported Wednesday. In the meantime, the figure from states already reporting -- meant to be an actual count, not an estimate -- appears to back up the claim from President Barack Obama's Council of Economic Advisers that 600,000 to 1.1 million jobs have been created or saved, the newspaper said."

Vice President Joe Biden had this to say:

"We're moving in the right direction. We're starting to make real progress on the road to recovery. Quite simply, the Recovery Act is performing as advertised."

Are these claims by the government accurate? Probably not, but it doesn't really matter.

Government may create jobs that didn't exist before, but the net effect on the economy is negative. Jobs don't matter, production does. Government stimulus jobs are mostly temporary and they allocate resources to some of the least productive parts of the economy. This misuse of resources further sours an already ailing economy. To quote Casey's Research:

"Consider the Obama administration's claim that 640,000 jobs were created from $159 billion of stimulus spending (a cost of almost $250,000 per job, most of which are temporary, and may last for just weeks).

S0 we spent $250,000 per job to create a few jobs that pay a few workers a one time salary of a few thousand dollars? How is that productive? How will that create more jobs in the future? How will that pull us out of our new depression? The answer is that it won't. Government stimulus has never been the primary driver the any economy to pull out of any recession in history.

One question you may ask yourself is, "where did that $159 billion dollars come from?" It came from you and me....the taxpayers. What would we have used that $159 billion for had it not been taken from us to be redistributed so inefficiently? Casey's research answers:

"Some of us would have spent it on food, some shelter, some luxury goods, and some may have saved and invested the money. Indeed, if that $159 billion had not been taken from us, then every business we would have purchased from or invested in would be better off. They would have received more revenue and produced more goods, and potentially would have hired more people to make and sell those goods."

Jobs created in this fashion are normally permanent. That is how an economy grows.

"But it doesn't stop there. If that $159 billion had been left in our hands, we would have spent and allocated it on things that are the highest priority for us. This action would have sent a series of signals through the market of what to produce more of and what to invest more in. It would have encouraged competition among suppliers of the various items being purchased, driving them to find more efficient and effective ways to create superior, more innovative products for less. This is how the market creates wealth. Competition spurs innovation and creative destruction, which increases productivity.

Sounds like the government needs to take a lesson in economics 101. The only effective government stimulus I can think of is tax cuts. However, to do that the government must reign in it's deficits (like that's going to happen). The Feds are too busy bailing out the automakers and misallocating our tax dollars to "stimulus" to let the free market fix the problem the government created in the first place.

So, instead of the $159 billion, higher employment, more goods and services, and more innovative businesses producing what society values more, we have 640,000 (mostly temporary) jobs producing what society values less....and that's assuming the administration's claim is accurate.